AD #1406 – Don’t Panic Over June Sales, Autonomy for the Aftermarket, The CARB ZEV Maze

June 26th, 2014 at 11:58am

Runtime: 8:32

- June Sales: Don’t Worry, Be Happy
- How Small Can Engines Get?
- Ram Rolls Out ProMaster City
- Corvette Museum is a “Hole” Lot Better
- Autonomous Capability via Aftermarket Tech
- Understanding the CARB ZEV Maze

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In today’s Autoline Daily: will we see cars with 660 cc engines? Someone’s coming out with an aftermarket autonomy kit, and later in the show we’ll run you through what it takes for automakers to generate ZEV credits in California.

When US car sales get reported next week, don’t hit the panic button. You watch, the mainstream media will be screaming that car sales are down and will probably blame all the recalls for the drop in sales. But here’s why we say don’t worry, be happy. June of 2014 has two fewer selling days and one less weekend than June of last year. And once you make that adjustment, the daily selling rate will be up. Merrill Lynch forecasts that adjusted sales will be up 5% and the SAAR will hit 16.2 million.

Automakers are downsizing engines for better fuel economy. Ford has a 1-liter 3-cylinder engine. Fiat has a 0.9 liter 2-cylinder engine. So how small will engines be in the future? That’s one of the topics on our television program Autoline This Week.On that show, Chris Thomas the chief technology officer at Borg Warner says that 660 cc displacement is the practical threshold for turbocharged engines. He says once you go below that the clearances and tolerances become a difficult engineering challenge. Whoever thought we’d be referencing motorcycle-sized displacements when talking about cars?

Small commercial vans have become more popular in the American market recently and now Ram is showing off its ProMaster City. The van is a rebadged Fiat Doblo, and will come in two different configurations, the two-seat Tradesman cargo and 5-seat passenger Wagon. It’s powered by the 2.4L Tigershark engine, which is mated to a 9-speed automatic. The ProMaster City will be assembled in Turkey, while the cargo van will be upfitted in Maryland, but no word on when it will hit dealer showrooms.

It looks like things have gone from heartache to relief for the folks over at the National Corvette Museum. Remember that sinkhole that opened up in February and swallowed nearly $1 million worth of rare Corvettes? Well it turns out that attendance, membership and merchandise sales shot up sharply since then. In fact, the sinkhole attracted so much attention that they’re even thinking about putting some of the smashed Corvettes back in the hole.

Now here’s something I didn’t think was possible. A California startup is going to come out with an aftermarket kit to turn your set of wheels into an autonomous car. The company is called Cruise Automation, their kit will work with a new Audi A4, and the cost is $10,000. A roof-mounted system contains cameras, radar and sensors that feed a computer in the trunk. It’s really an adaptive cruise system with steering that will only work on select California highways. But the company is working on adapting it to other cars and using it on more roads. We keep saying that autonomous cars will be here faster than most people realize and the fact there is now an aftermarket kit shows how quickly this technology is going mainstream.

Be sure to join us for Autoline After Hours starting tonight at 6PM Eastern time. Our guest tonight is John Krafcik, now president of TrueCar, but who was formerly CEO of Hyundai Motors America, was a PD person at Ford before that, and who was a grad student at MIT who helped write the book “The Machine That Changed The World.” So join Todd Lassa, Automobile; Steve Finlay, Ward’s Dealer Business and me for the best insider discussion about what’s going going on in the automotive industry.

Coming up next, why automakers are so keen to put electric and fuel cell cars in their showrooms even though they know they’ll lose money on every one.

Automakers are putting electric and fuel cell cars in their showrooms, not because of public demand, but because the California Air Resources Board has jiggered the game in their favor. California virtually created the global EV market on its own, by mandating that automakers must generate zero emission credits if they want to sell any kind of car in the state. Since California accounts for 10% of the U.S. market and since 10 other states have adopted that mandate, and since the U.S. market is the most profitable in the world, most automakers have to fall into line. Starting next year major automakers have to have enough ZEV credits to cover 14% of all the vehicles they sell in California.

The ZEV program is horrifically complicated. You practically need a PhD in government regulations to wade through the Byzantine maze of procedures, timetables, exclusions, additions, revisions, updates and definitions. Even CARB’s own staffers struggle to keep up with it all.

So we’re going to give you a simplified rundown of what it takes to generate ZEV credits.

It starts with neighborhood electric vehicles, or NEVs. This includes vehicles like the GEM, which used to be sold by DaimlerChrysler but is now part of Polaris. I don’t think any automakers offer NEVs in California anymore but get 0.30 credits.

Next up is the AT PZEV, or advanced technology, partial zero emission vehicle. Translation: that means hybrid. An AT PZEV will only get you 0.6 credits.

Then comes what the California Air Resources Board calls a Type 0 car. These are plug-ins like the Chevrolet Volt that have less than a 50 mile driving range on pure EV power. A Type 0 car will get you one ZEV credit.

A pure electric car like the Nissan Leaf, that has a pure EV range of 75 to 100 miles is what the CARB calls a Type II car. It gets 3 ZEV credits.

And then, a car that can travel over 300 miles on pure EV power and can be 96% refueled in less than 15 minutes is called a Type V car and it gets 7 credits. If you can refuel it faster, it can get 9 credits.

With today’s technology it’s impossible to refuel a battery electric car in less than 15 minutes. And that’s why automakers are coming out with fuel cell cars. They need those credits.

As one industry insider told me, “This is our choice. We can lose $14,000 on every EV and get three credits, or we can lose $50,000 on every fuel cell car and get seven credits.”

And you better comply. There is a $5,000 fine for every ZEV credit you come up short.

To me, this has disaster written all over it. Will the boards of directors of car companies, who have a fiduciary responsibility to spend the shareholders’ money wisely, commit additional billions knowing they’ll never earn a return on that investment?

I don’t have a problem with California’s goal, but I do have a problem with the cost. So my question to all of you out there, do think that this is going to work?

And that wraps up today’s report. Thanks for watching and please join us again tomorrow.

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29 Comments to “AD #1406 – Don’t Panic Over June Sales, Autonomy for the Aftermarket, The CARB ZEV Maze”

  1. Tony Gray Says:

    Car engines shrink to motorcycle engine size…motorcycle engines grow to car engine size. What a world we live in.

  2. Chuck Grenci Says:

    “While meeting the fleet average standards,
    each manufacturer’s sales fleet shall be
    composed of at least 2% ZEVs in the model
    years 1998 through 2000, 5% ZEVs in 2001 and
    2002 and 10% ZEVs in 2003 and subsequent.”

    I got the above statement from the ZEV credit tutorial; I kind of understand this statement (but a lot of the rest of the document goes down-hill from there); I think I know who wrote the IRS regulations (or visa versa).

  3. dcars Says:

    Society Goals vs Business Goals vs Personal Goals. In Beijing, they had no pollution controls on industry and no vehicle economy targets. You can’t breathe in that city and people don’t want to visit or live there.

  4. G.A.Branigan Says:

    As it stands,I think it’s yet another one of california’s hairbrained ideas.Who wrote it….al gore?

  5. Al Jadczak Says:

    Hi John,

    Don’t worry if the ZEV Credit system works, it’s all about the intention. This country, and California the biggest part of that, feels the cost is justified as along as the intention is there to make something better. These folks don’t care who gets hurt and how many people lose their jobs over something like this. They have what they want, it just seems that they don’t want anyone else to have it. I say, let California do what they want and suffer the consequences. If you think back to the EV1 days, there was a similar system in place that required a percentage of vehicle had to be zero emissions. GM had the only vehicle that met that requirement. The other companies seem to still be able to sell cars there. Wait and see, the usual outcome is failure.

  6. rick bradner Says:

    Interesting to hear B-W mentioning 660cc engines at the same time as Japan is looking at fazing out Kei cars…

  7. Glenn Dunham Says:

    ZEV Credits !? I can’t wait to see how creative automakers get in pricing to stay market share and profit positive, along with how consumers consider buying out of state if California (& state adopters) pricing is out of sync with other (non-adoptive) locales. It may have been possible (not-sure) if automakers could price differently for special emission engines; but now entire cars? Should get interesting….. I hope my costs don’t go up because I’m subsidizing ZEV units for others, but I don’t know how they couldn’t (insert sad emoticon here!)

  8. Mike Says:

    From Wikipedia: The governing board of CARB is made up of eleven members appointed by the state’s governor. Half of the appointees are experts in professional and science fields. Others represent the pollution control agencies of regional districts within California – Los Angeles region,

    The point is that they were elected by no one while affecting all of us and how we live.

  9. Ricky Beggs Says:

    I know the photo of the Promaster City was based on European models. How many noticed that there is an extra pedal in the driver floor board that is not normally seen in the US. Do the 9 speeds in the transmission have to be manually shifted? Keep on bringing the news everyday!

  10. Earl Says:

    I can see engines getting smaller and turbo’s that have higher psi’s. Anything to improve gas mileage.
    There was some talk of GM and Ford developing 9 and 10 speed transmissions. Does anyone know when we’ll see them and in what vehicles?

  11. buzzerd Says:

    Mike- but you, or Californians, do elect there bosses so if the people really didn’t like what was going on then why hasn’t anyone changed it?

  12. Brett Says:

    California is the rest of the USA ten years from now. Be thankful there’s a state that you can look to and learn what works and does not work.

  13. Kit Gerhart Says:

    11, Exactly. In the late 50′s and ’60′s, the air in the LA area was so bad you couldn’t breathe it, so California mandated, first, positive crankcase ventilation, and then exhaust emission controls. The car companies said they couldn’t do it, but they did, albeit rather poorly for the first few years. Then, the rest of the U.S., and then the rest of the developed world adopted similar emission control regs. How long would it have been before the air was cleaned up, had California not led the charge? Maybe decades. Now, the cars run clean, make good power, and are very efficient compared to their predecessors.

    As far as California’s ZEV thing, maybe they are going too far, or maybe not. It’s way too early to know. In any case, I presume any car company that doesn’t want to play the game can quit selling cars in California, but I don’t see them doing that.

  14. Gerry P Says:

    Everything you say about the ZEV’s is true, but it is human nature to not do anything unless we are forced to. Wars unfortunately bring out technology at a startling rate, as did the space race, disease epidemics, and of course legislation. The problem with legislation is that every 4 years, the winds can change direction. We have seen CARB change their minds when their executive office changes parties. In general though, they have found a way to force development of new technologies in transportation. 20 to 50 years from now, fuel cells or EV’s may be the standard, and mass production brings down the price. EV’s are a lot more simple machines than an internal combustion car, but the EV’s are still built on pumped up pilot lines, and the batteries need to come down in price.
    I think the best is yet to come. When I see what the latest F1 and Indy cars are doing with smaller engines and capacitive boost, I’m thinking I can’t wait to see what will be next. Why do you think I watch your show every day :)

  15. HB Says:

    Are the CARB people the same ones making CA ethanol come from Brazil? Costing 40 Cents a gallon more than US made ethanol too. They claim it is “Greener” then it has to be trucked and shipped on boats to CA, but they don’t factor in those emissions.

  16. John McElroy Says:

    @13 & 14. As I said today on the show I agree with California’s goal to have clean air, and reduce GHG’s. But is the ZEV credit program sustainable if automakers lose money on every car that qualifies?

  17. Brett Says:

    There are many ways to turn a profit in the automobile manufacturing business. Many ways to bury a loss, too.

    What if the manufacturer posts that loss in-part against their marketing budget? Part against R&D? From the “big picture” perspective, it must seem doable or they wouldn’t be trying to play along.

  18. RumCoke Says:

    What’s up with all of these weird Euro vans coming out of Turkey? Do they have some kind of advanced cargo management skills that we don’t know about?

  19. Kit Gerhart Says:

    15, It probably takes less energy to bring ethanol from from Brazil to California by tanker ship, than to bring it from Indiana by truck and rail. Big ships move heavy, bulky cargo very efficiently.

  20. Dave Says:

    What is the promaster city with 3 pedals with 9 speed automatic or was that a Fiat dolblo with manual shift?

  21. G.A.Branigan Says:

    The picture showed the interior of the Fiat Doblo.Ain’t gonna be no steekin’ manuals here,(said with sadness).

  22. Kit Gerhart Says:

    20, No diesels either, it appears, but they have a 4 cylinder diesel in the monster Promaster.

  23. vincent joy Says:

    CA’s ZEV program is another example of how, when Democrats control a state [or a city - think Detroit], the place becomes an experiment in FASCISM and it always fails. Byzantine regulations such as these become a breeding ground for corruption. The MOST EVIL entity on earth is GOVERNMENT. This is just another example of it.

  24. Kit Gerhart Says:

    You should have lived in southern CA when they performed their “experiment” with emission controls on cars. You might have appreciated the results in a few years. Yes, the ZEV program might not be as beneficial, but someone has to lead with getting new technology into use.

    Also, if you don’t like government, perhaps you should move to Somalia, or Antarctica if you’d like less violence, and don’t mind the cold.

  25. Brett Says:

    Fascism is the joining of government and corporations. In other words, government by and for business, not the people.

    California’s ZEV program has NOTHING to do with fascism. It might have something to do with the concept of Socialism, but that’s diametrically opposed to Fascism.

    Government is supposed to be the representative of the people. Are you evil? No? You’re part of government as a citizen.

    All human beings are dysfunctional to a greater or lesser extent. Therefore those things created by humans, be they machines or organizations, will be imperfect. Do we damn them all or do we try to improve things as best we can?

    That’s the great thing about hanging labels on stuff, you don’t have to think about it or understand it. Very convenient.

  26. Steve Says:

    If $14,000 earns 3 credits, that’s $4,666.67 per credit.

    If $50,000 earns 7 credits, that’s $7,142.86
    per credit.

    The difference, $2,476.19. I guess I don’t understand regulatory economics.

  27. G.A.Branigan Says:

    Let’s be clear about this,zev is just another tax,period.

  28. Kit Gerhart Says:

    It sounds like Toyota is in the best position on the CA ZEV thing, if a regular hybrid gets 0.6 credits. A Volt may get one credit and a Leaf three, but Toyota sells enough Prius and Camry hybrids to way more than make up for it, and they make money on them.

  29. Kit Gerhart Says:

    For people who think they need 4 wheel drive, nothing beats skinny tires and lots of ground clearance.